Journal article
A Bayesian Simulation Approach To Inference On A Multi-State Latent Factor Intensity Model
CL Chua, GC Lim, P Smith
Australian and New Zealand Journal of Statistics | WILEY-BLACKWELL | Published : 2011
Abstract
The influence of economic conditions on the movement of a variable between states (for example a change in credit rating from A to B) can be modelled using a multi-state latent factor intensity framework. Estimation of this type of model is, however, not straightforward, as transition probabilities are involved and the model contains a few highly analytically intractable distributions. In this paper, a Bayesian approach is adopted to manage the distributions. The innovation in the sampling algorithm used to obtain the posterior distributions of the model parameters includes a particle filter step and a Metropolis-Hastings step within a Gibbs sampler. The feasibility and accuracy of the propo..
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Funding Acknowledgements
The authors thank the handling editor, Professor Silvapulle, the associate editor, and the referee for very helpful comments. The authors were funded by a grant from the Melbourne Centre for Financial Studies, a consortium of Melbourne, Monash and RMIT Universities, and the Financial Services Institute of Australasia. The views expressed in this paper are those of the authors and not necessarily those of the Reserve Bank of Australia.